Wall Street Journal (08/31/13) Josh Mitchell
Inflation remains far below the U.S. Federal Reserve’s target as the central bank considers scaling back its bond-buying program, complicating any decision on how to proceed. In the last reading of inflation before the Fed’s Sept. 17-18 meeting, overall prices were up 1.4% from the previous year while core prices rose 1.2%. The Fed’s bond-buying and its promises to keep short-term interest rates low for a long time reflect discomfort that it is failing on both prongs of its mandate—to aim for maximum employment and stable prices, which it defines as inflation of about 2%.
A decision to begin scaling back the extraordinary monetary stimulus will be based on Fed officials’ near-term forecasts for growth, jobs, and inflation as well as their assessment of the risks the economy confronts. The Fed acknowledged concerns about low inflation in its latest policy statement, but it said inflation and economic growth should pick up in the second half of the year as the effects of higher taxes and federal spending cuts fade.